Canada: Walking The Talk: Canadian Competition Bureau Reiterates And Demonstrates Commitment To Active Enforcement

I. New Head of Competition Bureau's Vision: Active Enforcement in the Digital Age

On May 8, 2019, McCarthy Tétrault was proud to host Matthew Boswell, the newly-appointed Commissioner of Canada's Competition Bureau (Bureau).  Commissioner Boswell described to our clients his ambitious vision for the Bureau over the coming years: to be one of the world's leading competition agencies, specifically in terms of its work in the digital economy. The Commissioner made it clear that he will not shy away from the enforcement of our competition laws and outlined a number of initiatives to advance this vision. The initiatives that will have the greatest impact on businesses in Canada are summarized here.

Deceptive Marketing/Privacy:

  • Deceptive marketing remains a key enforcement priority, with a focus on online representations – particularly sale and discount claims. The Bureau has been active in this area for the past several years, and this trend will continue. Businesses therefore need to continue to be vigilant in ensuring the accuracy of representations. Indeed, as we discuss below, just hours after he gave his remarks, the Commissioner filed a Consent Agreement resolving his allegations in respect of the advertising of sleep sets for $4.5 million.
  • Moreover, the adequacy of disclosure in the context of the digital economy will be scrutinized. Failure to seek consent, or inadequate requests for consent, for the use of personal data may be treated as misleading advertising, even with respect to apps that are "free". The Commissioner also stressed the importance of disclosing material connections between companies and social media influencers. To learn more, see our previous article, Influencer Marketing: Understanding Disclosure Best Practices.
  • The Bureau's new Chief Digital Enforcement Officer, whose appointment will be announced shortly, will advise the Bureau on the necessary technology, tools and techniques to capture evidence of deceptive marketing practices made online.

Investigative Techniques:

  • The Commissioner indicated that the Bureau will utilize all tools at its disposal in the course of investigations where it makes sense to do so, including court orders for depositions. In the past, this power was rarely invoked. Businesses need to be prepared to respond to a more fulsome arsenal of investigative techniques both in respect of criminal and civil investigations, including merger reviews.


  • The prosecution of cartels, described by the Commissioner as the "supreme evil of antitrust", continues to be a high priority for the Bureau. New techniques are being considered and implemented to improve detection and secure convictions. Specifically:
    • the recently created Criminal Intelligence Unit will provide tactical and strategic intelligence support to Bureau investigators and managers;
    • the Bureau is seeking to acquire new and better technology for the detection of bid-rigging through data analysis, to ensure timely investigations and case referrals to the Public Prosecution Service of Canada; and
    • Having observed the success of other agencies including the U.S. Federal Trade Commission and the Ontario Securities Commission in incentivizing whistleblowers through financial compensation, the Bureau is considering whether to adopt a similar approach to supplement the statutory whistleblower protections provided under the Competition Act (Act).
  • The prioritization of cartel enforcement, and the Bureau's willingness to invest in new tools to do so, underscores the critical importance of robust competition compliance policies for all business in Canada.

Merger Review:

  • The Bureau will actively investigate mergers that are likely to raise competition law concerns, whether or not they exceed the statutory pre-merger notification thresholds. The Bureau's Merger Intelligence and Notification Unit's role has been expanded to include a broader focus on intelligence gathering, and in its first few months of operation, the unit identified two transactions that it is now reviewing, which were not notifiable under the Act's merger notification provisions. Early assessment of the competitive impact of all transactions, large and small, and contractual risk allocation are therefore critical to transacting parties.
  • The Bureau is tightening its procedural approach to accepting the efficiencies defence. The Commissioner noted that he is "highly unlikely" to exercise enforcement discretion on the basis of an efficiencies defence in an otherwise problematic transaction, without "reliable, credible and probative evidence" of efficiencies. The Commissioner also highlighted the Bureau's need for adequate time to review the evidence, likely to be achieved through timing agreements that extend beyond the statutory waiting period. For merging parties, this signals a longer and more involved review process in cases where efficiencies are asserted.

Commissioner Boswell's stated vision signals an invigorated enforcement agenda for the Bureau in the coming years, focused particularly on the digital economy. The implications are wide-ranging, particularly as businesses strive to adapt to a dynamic economic environment; anticipating competition law risk and staying ahead of the curve is more important than ever.  For more insight on what to expect in competition law enforcement, see our previous article, Canadian Competition and Foreign Investment Law: Trends and Developments to Watch for in 2019.

II. Misleading Advertising: $4.5 Million Rebate Advertising Settlement Sends a Strong Compliance Message

The Bureau announced, on May 8, 2019, that the Hudson's Bay Company has entered into a Consent Agreement and agreed to pay a $4 million administrative monetary penalty to settle the Bureau's misleading advertising investigation into alleged fake rebates. The retailer will also pay $500,000 towards the investigative costs incurred by the Bureau. This settlement follows an investigation into advertising and pricing practices for sleep sets in Canada.

This is another strong message that the Bureau is vigorously enforcing the ordinary selling price (OSP) provisions of the Act. Under these provisions, the advertised regular price in support of a discount must either meet:

  • the "volume test": more than 50% of the product was, or will be, sold at the advertised regular price during the 12 months preceding or following the sale period; or
  • the "time test": the product was offered in "good faith" for sale at the advertised regular price during more than 50% of the time during the 6 months preceding, or following, the sale period.

The Bureau was alleging that neither test had been met by the retailer with respect to certain sleep sets. Firstly, the Bureau alleged that the volume test was not met because virtually no sales had been made at the advertised regular prices. Secondly, it argued that the time test was not met because the advertised regular prices were not offered in "good faith", as the retailer expected to make only 5% or less of overall sleep set sales at the ordinary price.

The retailer raised interesting arguments in its defence, including the fact that the Bureau's enforcement approach to the time test was too burdensome and, in fact, was confusing the time test with the volume test. This settlement puts an end to the legal action undertaken by the Bureau in 2017, on the eve of the hearing before the Competition Tribunal. A judicial decision in this matter would have provided interesting guidance, as the last judicial consideration of the OSP provisions dates back to the 2005 Sears matter with respect to tire sales.

This Consent Agreement stresses the importance of having robust compliance measures in respect of advertised rebates. In its application, the Bureau criticized the retailer's compliance policies, including the absence of a separate compliance department or a specific executive compliance committee responsible for the management of the company's existing "Advertising Compliance Manual". The Bureau also alleged that there was insufficient internal guidance on compliance with the volume and time tests.

This price advertising settlement follows the January 2017 and May 2015 consent agreements with Amazon and Michael's, in which the two retailers agreed to pay $1.1 million and $3.5 million, respectively, following the Bureau's concerns over misleading OSP advertising.

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